Amid the sluggish property market in
recent years, prices of leasehold private homes appear to have been more
resilient than those which are freehold, according to a study by consultancy
Cushman & Wakefield.

Cushman & Wakefield said prices of
non-landed freehold homes saw a steeper drop of over 4% since the third quarter
of 2013, compared to the 1% decline for those on a 99-year leasehold. Its study
was based on the price indices of freehold and leasehold condominiums compiled
by the Urban Redevelopment Authority (URA).

However, analysts have said transaction
volumes have been thin, and that could have affected the overall numbers.

Cushman & Wakefield said the
weighted average price of leasehold properties have held up better - declining
by about 1.4% since the third quarter of 2013. And when compared to the second
quarter of 2009 - when the market was at a bottom - they have climbed about 57%.

The consultancy also said that the
price gap between the two segments has narrowed.

Ms Christine Li, director of research
at Cushman & Wakefield, noted: "If you look at Newton 18, which is a
freehold property as compared to its neighbour Amaryllis Ville, (which has a)
99-year lease - if you compared the price gap in the early days, say 2002-2003,
the difference is actually about 35% or so. But in recent quarters, the gap has
narrowed to 15%, which means that over time, leasehold projects might
outperform freehold projects.

“In terms of outlook, if everything is
status quo, if the Government does not loosen the cooling measures, TDSR (Total
Debt Servicing Ratio) or stringent requirement for en bloc sales, we think
leasehold properties could outperform freehold properties, given that
attributes of some leasehold properties are better in terms of location and
amenities."

In recent years, curbs on loans, such
as the Total Debt Servicing Ratio framework, have weighed on overall property
demand, but Cushman & Wakefield said freehold projects are at a
disadvantage because they are generally more expensive and require a higher
capital outlay.

Analysts said the price performance of
freehold and leasehold properties also depends on the en bloc potential.
Typically, freehold properties enjoy a higher price premium when the en bloc
market is active.

And according to other industry
watchers, freehold properties continue to attract interest. Based on a study of
caveats lodged, consultancy Knight Frank said the price gap between freehold
and leasehold non-landed homes across Singapore has risen - from about
33% in 2011 to nearly 47% last year.

According to numbers from Knight Frank,
the yearly prices of freehold units averaged at $1,532psf in 2014 - an increase
of 9.8% year-on-year. However, those for leasehold units fell by 0.4% over the
same period to $1,045psf.

Ms Alice Tan, head of consultancy and
research at Knight Frank, said: "Going forward, in the next few years, as
the Government gradually releases land sites which are all leasehold tenure,
the availability of freehold properties is slated to remain stagnant or decline.
Given that limited supply, I think buyers will still have freehold properties
as their first choice."

Meanwhile, Mr Alan Cheong, senior
director of research and consultancy at Savills, added: "Look at the
resale and subsale market. If you look at the period in time, the gap has been
consistently between 25 and 28% since the advent of TDSR. I guess if these
measures are in place, the gap would be probably maintaining at the 20-plus per
cent range. I do not expect it to come down."

Analysts said it is important to note
that transaction volumes in the last two years have been thin and could affect
the overall data analysis. They also noted that apart from land tenure, other
factors like location and features of the development, also have an impact on
home prices.

Source:
CNA

The
wife and I belong to a generation that grew up with the perception that when comes to value preservation, a freehold
property is always "a better buy" than a leasehold one (within the same vicinity), as the
former tends to hold their values better especially when the market turns
south. But the paradigm seems to be shifting. Then again, it
also depends on who you ask...

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